The worst has yet to come for the real estate market as home-mortgage delinquencies surged to their highest level in nine years as the virus-induced economic downturn continues to crush household finances.
Property research firm Black Knight Inc. reports total borrowers more than 30 days late surged to 4.3 million in May, up 723,000 from the previous month. This means at least 8% of all US mortgages were either past due or in foreclosure.
The report said those who qualified for forbearance made payments early in the pandemic. However, now, the percentage is much lower, some 15% of homeowners in forbearance agreements made payments as of June 15, down from 28% in May and 46% in April. A forbearance agreement allows homeowners to defer mortgage payments for up to six months, but afterward, borrowers must repay.
With no V-shaped recovery in the economy and tens of millions of folks unemployed, along with new uncertainties over business reopenings as a second coronavirus wave appears to be emerging - homeowner delinquency is expected to rise through summer as many will soon figure out their home is no longer affordable.
Black Knight showed the highest rate of delinquencies in May were in Louisiana, New York, New Jersey, and Florida.
You might recall, we noted a National Association of Realtors survey last week that said nearly half of respondents considered selling their home because of the inability to service mortgage payments.
We outlined in April how the next real estate downturn was only in the beginning stages:
- Here Comes The Next Crisis: Up To 30% Of All Mortgages Will Default In "Biggest Wave Of Delinquencies In History"
- Americans Not Making Their Mortgage Payments Soar By 1064% In One Month
- Mortgage Market Meltdown: Even The Wealthiest Loan Applicants Are Now Being Turned Down By Lenders
If readers didn't know, a repayment of forbearance is usually in one lump sum at the end of the six months. So it'll be around the fall season when borrowers will have to pay back the owed money.
Repayment could be a serious problem for many, which could lead to a wave of forced selling. The forbearance has only delayed the downturn in the housing market - as the worst has yet to come.
In a separate report, at least 30% of Americans didn't make their housing payment for June.